Sands Shift in the Mideast DTH Business

April was a busy month in the Middle East. On April 5, Saudi Arabia's so-called dish ban was lifted, enabling the big-three direct-to-home satellite platforms to start legally advertising, promoting and selling their services in the country.

April 22 saw the start of the United Arab Emirates' E-Vision cable system. E-Vision is a wholly owned subsidiary of telco Etisalat. It will distribute about 30 basic channels, plus a premium tier, to the capital city of Abu Dhabi and the commercial center of Dubai.

A statement from E-Vision CEO Humaid Rashid Sahoo said the system will expand soon to include true video-on-demand and Internet access. He expects 100,000 homes to be passed by the end of next year.

But not all April news was good news. On April 17, the powerful Arab States Broadcasting Union revoked the membership of DTH and channel group Arab Radio & Television. The ABSU-which negotiates and manages the allocation of TV rights for most international sports coming into the region-said ART has "violated an agreement signed by Arab television stations."

Key to the dispute is the ABSU's allegation that ART has been separately negotiating for certain sports rights outside of the ABSU.

ART is now excluded from carrying Arab Football Federation-organized soccer until 2003 and the Summer Olympic Games through 2008, as well as Copa America soccer and certain World Cup soccer qualifying matches.

Mohammed Kabli, general manager of ART's sports channel, said ART has not been suspended from the ABSU, as it has already left the organization. A meeting aimed at resolving the dispute is set for next month.

Despite this potential setback, ART president Sheikh Saleh Kamel said the company is seeing real subscriber growth, especially in North America, where it now has 80,000 DTH subscribers on EchoStar Communications Corp.'s Dish Network.

As for the rest of the world, Kamel said, "We met our goals for 1999, and we ended the year with a global subscriber base of some 300,000. Each month, we do a little more, and we find that word-of-mouth is our best promotion."

The end of the Saudi dish ban makes life much easier for ART in its richest Gulf market. "In Saudi Arabia, everything is now legal. We bring the decoders through customs officially, paying an 11 percent import tax, and everyone is happy," Kamel said.

Nevertheless, he admitted that profits are still elusive for ART, which is now in its seventh year of operation. "We are on track to achieve breakeven before the end of next year," he added. "It has been slower than we originally expected, and we have reorganized as we learn."

Kamel said relations with archrival Orbit Satellite Television and Radio are "better than ever at the most senior level."

Orbit president and CEO Alexander B. Zilo agreed, saying his goal is to see ART-and ART's "Western" programming partner, Showtime Networks Inc.-join Star Select on the Orbit platform, operating as separate bouquets but using the same encryption and avoiding the "ruinous piracy" that affects the business locally.

That's unlikely to happen in the short term, but Zilo also said the end of the dish ban was already bringing tangible benefits to Orbit. "The big difference is that we do not have to rely on third parties to smuggle decoders into the kingdom," he added. "It also has a real impact on prices in the market. The higher the risk, the higher the return, but the fact remains that these third parties made more out of our business than we did."

"Our fourth quarter was simply fabulous," he said. "This year, we have a very ambitious target as we move toward the platform's breakeven. It will be a tight squeeze to achieve this year, [but] whatever happens, I'd say 12 to 18 months from now, we will be there."

Einstein noted that Showtime had been dependent on word-of-mouth in Saudi Arabia. But now, "the first decoders were delivered in February, and advertising and promotions booked," he added.